After seeing strong earnings from some of the largest US companies during the past few weeks, investors are now turning their focus to macroeconomic fundamentals.
Stocks rallied on Friday after a much weaker than expected nonfarm payrolls report for April raised speculation that the Federal Reserve might keep rates lower for an extended period of time, if the country's economic recovery doesn’t pick up pace. That outcome will enable stock valuations that are quite rich after a powerful rally over the past one year.
In the aftermath of the jobs release, every sector in the S&P 500 pushed higher. Technology vied with Cyclicals, Energy and Industrials shares for the top spot. The Russell 1000 Value Index and its growth counterpart both ended Friday 0.8% higher, after value stocks outperformed every day during the past week.
Below is our list of three significant earnings announcements, scheduled for the week ahead, that could provide some insight into how companies plan to shift their strategies as the US heads toward a hoped-for full reopening this summer.
1. Disney
The Walt Disney Company (NYSE:DIS) reports earnings for its fiscal 2021 second quarter after the closing bell on Thursday, May 13. Analysts are expecting $15.86 billion in sales and $0.27 profit per share.
If analyst projections are right, a profitable Q2 will be an impressive turnaround for the House of Mouse which took massive losses during the pandemic when its core travel businesses—theme parks, cruises and hotels— faced closures and capacity restrictions.
With the economic reopening and its parks coming back to their capacity slowly, investors will also zero in on subscriber growth in its streaming service, Disney+ which is benefiting from the stay-at-home environment.
Shares of the entertainment giant have gained 75% in the past one year, after falling about 40% in March 2020. This strong rebound shows investors’ faith in the company’s business model and its ability to thrive again when the economy reopens. Shares closed on Friday at $184.84.
2. Airbnb
The home-rental platform Airbnb (NASDAQ:ABNB) will also report its Q1 earnings on Thursday after the market close. Analysts forecast a loss of $1.05 a share for the period on sales of $718 million.
Results from the San Francisco-based company might show the coronavirus pandemic continued to curb demand for travel after a surge in cases through the past winter led to new lockdowns and restrictions and the vaccine rollout faced hurdles globally.
Airbnb was among the hardest-hit companies during the pandemic and almost shelved its IPO plans in December as demand for its rentals plunged. By April last year, room bookings and experiences had plunged 72%.
But the accelerating vaccine rollouts in the developed world should increase the number of bookings during the summer, prompting some analysts to predict that the worst might already be over for the travel giant. Airbnb stock has gained 3% this year, closing on Friday at $151.21.
3. Simon Property
Simon Property Group (NYSE:SPG), America's largest mall operator, will report its Q1 earnings on Tuesday, May 11, after the market close. Analysts forecast $2.27 a share profit on sales of $1.1 billion.
The company’s shares have proven to be a great turnaround bet during the pandemic, as they rebounded sharply after the March dip when investors turned extremely bearish on the owner of retail malls. The stock closed on Friday at $124.94, up more than 119% during the past one year.
Investors are hopeful that the rapid reopening of the US economy after the successful vaccine rollouts will bring back customers to malls and revive their sales. Jefferies upgraded the stock to “buy” from “hold,” last month, saying the real estate firm, with a manageable debt level, stands to benefit from pent-up consumer demand.